Mortgage Blog - May 15, 2017

Last month, consumers grew more optimistic about the opportunities in today's housing market. Fannie Mae's Home Purchase Sentiment Index went up 2.2% in April and those who said now is a good time to buy a home rose 5%. A healthy jobs situation drives a healthy housing market so it was very encouraging that Fannie also found 77% of consumers are more optimistic about the stability of their jobs, a 7% bump over the month before and consumers reporting their household income significantly higher than a year ago went up two percentage points.

Those good feelings do seem to be affecting home sales. The Mortgage Bankers Association Mortgage Applications Survey reported their weekly Purchase Index at its highest level since October 2015 and the Conventional Purchase Index reached its highest level since April 2009. A study from a national real estate site says the majority of homes are still priced below their pre-recession peaks, with just 34.2% surpassing those values. In line with this, the National Association of Home Builders reports 60.3% of new and existing homes that sold in the first quarter were affordable to families earning the U.S. median income of $68,000.

Review of Last Week

If you had money in tech stocks, you probably had a nice week in the markets again, as the tech-heavy Nasdaq logged its fourth straight weekly gain. Not so good for the blue-chip Dow or the broadly based S&P 500 as both suffered small setbacks after heading higher the last four weeks in a row. Centrist candidate Emmanuel Macron won Sunday's presidential election in France so Wall Street concerns about that country leaving the European Union evaporated. Traders in fact were unusually calm, as the CBOE Volatility Index (VIX), also known as the "investor fear gauge," on Monday hit its lowest mark since December 1993.

One thing people are fearing less is an aggressive rate-hike path from the Fed. The President of the Chicago Fed said two more rate hikes this year may not be necessary after the Consumer Price Index (CPI) report showed inflation pressures moderated a bit in April. Retail Sales went up 0.4% for that month while the March number was upwardly revised from -0.3% to 0.1%. Best of all, the University of Michigan Consumer Sentiment report revealed consumers had some of the most favorable real income expectations in twelve years.

The week ended with the Dow down 0.5%, to 20897; the S&P 500 down 0.3%, to 2391; and the Nasdaq UP 0.3%, to 6121.

The bond market reacted to the lower inflation outlook by pushing prices up and yields down on Treasuries, although the 30YR FNMA 4.0% bond we watch finished the week down .06, to $105.14. In Freddie Mac's Primary Mortgage Market Survey for the week ending May 11, national average 30-year fixed mortgage rates stayed near lows for the year.

Where are interest rates headed?

This Week’s Forecast

Analysts are forecasting home building to continue its upward trek in April with both Housing Starts and Building Permits nicely ahead for the month. Manufacturing should be good overall. The national outlook is expected to show Industrial Production and Capacity Utilization both up in April and analysts expect the Philadelphia Fed Index to reveal factory activity in that region dipped just a bit, but is still in positive growth territory.

The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of May 15th – May 19th

May 15     08:30     NY Empire Manufacturing Index
May 16     08:30     Housing Starts
May 16     08:30     Building Permits
May 16     09:15     Industrial Production
May 16     09:15     Capacity Utilization
May 17     10:30     Crude Inventories
May 18     08:30     Initial Unemployment Claims
May 18     08:30     Continuing Unemployment Claims
May 18     08:30     Philadelphia Fed Index
May 18     10:00     Leading Economic Index
                                                                                                          
Federal Reserve Watch   

Speculative Forecasting Federal Reserve policy changes in coming months:

About three out of four expert observers feel sure we'll see a quarter percent rate hike next month however they expect the rate to stay there until September.

Note: In the lower chart, a 74% probability of change is only a 26% certainty the rate will stay the same.

Current Fed Funds Rate: 0.75%-1.0%

After FOMC meeting on:     

Jun 14     1.0%-1.25%
Jul 26     1.0%-1.25%
Sep 20     1.0%-1.25%

Probability of change from current policy:

After FOMC meeting on:     

Jun 14           74%
Jul 26           76%
Sep 20           84%

Where are interest rates headed?

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Cheers!

Scott Synovic
Nations Reliable Lending, LLC
Colorado's Mortgage Expert
www.scottsynovic.com
303.668.3350 Direct

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The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial
services and other professionals only. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors.

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